The Duncan Companys stock is currently selling for $15. People generally expect its price to rise to

Question:

The Duncan Company’s stock is currently selling for $15. People generally expect its price to rise to $18 by the end of next year. They also expect that it will pay a dividend of $.50 per share during the year.

a. What is the expected return on an investment in Duncan’s stock?

b. Recalculate the expected return if next year’s price is forecast to be only $17 and the dividend $.25.

c. Calculate the actual return on Duncan if at the end of the year the price turns out to be $13 and the dividend actually paid was just $.10.

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their... Expected Return
The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these...